I'm back! More IRS lien questions

[sunnylady303]

So I posted a while back about $20000 in back taxes we owe the IRS. We've seen a CPA and we're working on it. He seems to feel like it isn't such a big deal, that likely they will compromise on the amount and then we'll pay monthly payments for a couple of years.
We're also trying to buy a house. DH's dad is going to co-sign with us. We've told him about our IRS issues and the possibility of a lien.
Our CPA is not sure and I can't figure it out from reading online, but it sounded to me, in reading, like the IRS wouldn't necessarily put a lien on our home if we are going to them and we set payment arrangements. Is that right? I know some of you said you were making monthly payments (or knew some one who was) on back taxes and there were liens on the property. Is there a way to know whether they will do that or not? How do they decide? I can't figure it out. Our CPA isn't sure and the house thing is pressing right now. It really would be great if we could work it out with the IRS for monthly payments and not go through having a lien. I just don't know how they decide that. Any help would be VERY appreciated. Thanks.

[stretchmark]

I have no personal experience but my Dhs former business partner had a lien against his home and he was informed that any property he purchased would also have a lien against it EVEN THOUGH he was making monthly payments for years.

If the lien is in yours and your husbands name then any property obtained in those names will also be subject to a lien, as I understand it.

[big-mama]

If you work out arrangements with them, and make the payments on time, they will not file a lien. I did this and it worked for me.

However, from what I understand, if you don't work out arrangements, or if you do and stop making the payments, then they will file a lien...and once thats done, you cant get it off until the debt is paid. A friend had a lien placed on her house under these circumstances and when she sold the house, they took part of her profit for the debt.

Hope that helps!

[sunnylady303]

Thanks for the advice. I wonder, if I can ask big-mama, what was your debt with them? I'm wondering if maybe if it is over a certain number if that's when they decide to place a lien. I was also thinking that it might be if they have to come after you that that's when they do it. If you don't mind sharing I would be grateful. Or if you want to PM me. Or if you want to say none of your d*** business. Thanks!

[big-mama]

Hi,

It was a little over 4,000. I received a notice of intent to file a lien, called them, they sent me a form to fill out, I got to pick the amount I could pay per month. I set it up on auto debit. However, I switched banks and forgot to switch the auto debit....ended up missing a couple of payments. They sent me another notice of intent to file a lien, I called, explained. Resumed making payments and never had another problem.

Another thing I remembered, I had all of this going on while buying a house. None of it was ever on my credit report. FYI.

[catballou24]

we had a lien for 8k in taxes a few years ago. before the lien was placed, we called about making payment arrangements and they told us that was fine but they would have to place a lien on any property we owned. we didn't own anything at the time, but they still did the lien. we paid for over a year and then filed an offer in compromise. they accepted it and we were able to pay 1300 instead of the balance owed, which with penalties didn't go down much at all. when we wanted to buy a house, we had to bring the release of lien papers because it was still on our credit report and will be for another 4 years. we were still able to buy the house...but we had settled our debt before doing so. i don't know if that helps or not, but that was our experience...

[shayinme]

I keep trying to respond but keep getting timed out..

I know that when you start owing in the range of 20-25K the collection methods change, initially I did not owe that much but it snowballed in part because of interest and penalties. Anyway when I hit the 25K level despite being on a payment plan, they put a lien on me and as I understand it, they do it to protect their interest. We do own a house and basically it means should we sell, they are first in line to ger paid, they haven't made us sell but I will say when you get to the point of owing over 20K (my total IRS debt is a little over 40K) that payment plans really are not your friends. Initially we stared off paying something like $400-500 a month but because the interest & penalties are constantly accruing unless you are paying huge amounts (like 1-2K) a month it will take years to pay them off.

Looking back I wish I would have taken on a 2nd or 3rd job even to pay them rapidily because basically owing them is an albatross around our necks and with the liens, our credit is toast. Even going the OIC route is based off whether or not they think you can pay in full..

Also wanted to say when you set up a payment plan when you owe over 20K , you don;t get to choose how much you can afford, they require that you fill out paperwork documenting your expenses and your income and they leave with you with not nuch breathing room at all. Up until I lost my job last year we were paying $800 a month, basically creating a financial noose since we saved nothing which when you own a house is not a good thing, guess what I am saying is if I were you I might try to take care of the IRS before buying a house.

Shay

[shayinme]

Originally Posted by big-mama

Hi,

It was a little over 4,000. I received a notice of intent to file a lien, called them, they sent me a form to fill out, I got to pick the amount I could pay per month. I set it up on auto debit. However, I switched banks and forgot to switch the auto debit....ended up missing a couple of payments. They sent me another notice of intent to file a lien, I called, explained. Resumed making payments and never had another problem.

Another thing I remembered, I had all of this going on while buying a house. None of it was ever on my credit report. FYI.

Generally speaking they don't zap your credit for small amounts but when you owe over 20K they do, I learned that the hard way.

By the way I just wanted to say I don't mean to seem overly pessimistic but I was a lot like you when I started dealing with the IRS.. meaning I didn't owe a lot in fact just a bit less than you do. (my dh is self employed so we had years when we didn't make all the payments) Anyway I signed up for a payment plan, was always good about making the payments, but not really understanding why the debt was not going away. It wasn't until I talked to someone who worked for them (ex-MIL) and really read about how they accrue interest and penalties that I realized that even making a hefty payment only half was going on the actual tax but rather on penalties & interest. So what seemed manageable had mushroomed into a serious amount of money and now thanks to the leins (for each year you owe on, they put a lien on you so you end up with multiple liens) my credit is toast.

So I am speaking as someone who is living this mess, honestly it will take me probably 10 years to get this paid off and looking back I wish I had been able to ask someone who had been there what was the best way to deal with it..

[sunnylady303]

I appreciate your advice again this time, shayinme. We are in a situation where we suddenly have to find someplace to live. We can rent (not easily) or buy. Maybe I'm wrong but it seems like it would be better to buy the place that we want to be in long term now. Our CPA explained it like this - this tax crisis is coming no matter what. It will take a year probably before we have gone through the whole process of filing, negotiating an offer in compromise (what we will actually pay), and deciding a monthly payment. The way our CPA explained it if we are making a monthly payment on a mortgage that increases our income to debt ratio making the penalties and interest that we are going to be compromising on more likely to be reduced. After we have it all in place then I think you might be right. We should get a 2nd job for a year (or more!) and get that debt taken care of immediately. His thinking about buying a house is that 1. it's a good time to buy 2. it will put us in a position that will help reduce some of our fees when the IRS gets to that point and 3. we need housing anyway - it seems better to him (and I guess to me) to go ahead and be in a house before this all hits.
We have been living in a parsonage and there is a huge mold problem and so the church is going to tear it down and give us money to get our own housing. There really is nowhere close to rent so that is why we are buying.
I am mostly comfortable (as I can be) with all this. What I am freaking out about is that my in-laws really want to cosign. They have terrific credit and a high income. They seem unconcerned (after I explained it all) about this. They feel like the IRS won't put a lien on us and even if they do it won't effect their credit that much. I have no idea what the truth is or how to find out. Our CPA is uncertain of how much of a hit they would take. Like I said, they aren't worried about it. But I am.
How does all that sound? I'm trying to do what makes the most sense. Shayinme, you have been really helpful so far - all of you have - I would welcome more input and advice.

[CaraNicole]

Originally Posted by sunnylady303

So I posted a while back about $20000 in back taxes we owe the IRS. We've seen a CPA and we're working on it. He seems to feel like it isn't such a big deal, that likely they will compromise on the amount and then we'll pay monthly payments for a couple of years.
We're also trying to buy a house. DH's dad is going to co-sign with us. We've told him about our IRS issues and the possibility of a lien.
Our CPA is not sure and I can't figure it out from reading online, but it sounded to me, in reading, like the IRS wouldn't necessarily put a lien on our home if we are going to them and we set payment arrangements. Is that right? I know some of you said you were making monthly payments (or knew some one who was) on back taxes and there were liens on the property. Is there a way to know whether they will do that or not? How do they decide? I can't figure it out. Our CPA isn't sure and the house thing is pressing right now. It really would be great if we could work it out with the IRS for monthly payments and not go through having a lien. I just don't know how they decide that. Any help would be VERY appreciated. Thanks.

PMing you!

[purplegirl]

I am on a payment plan with them currently. I owed them a lot of money, which at the point I started on the payment plan, was increased by the penalties and interests. I got very lucky when one night I called them and pleaded my case--tears and all. The rep arranged a plan that was suitable to me. I didn't get a lien on my property and they even refunded the money they took from my checking account. I have made payments on time and gave them a large chunk when I sold my home. Since this all started, I called them and had my monthly payments reduced because I had paid on time and had made a dent in the total amount due. I owe a large amount this year but I am going to ask them to add it to my total. *sigh* what a rat race!

[shayinme]

I hear what you are saying, my concern with buying now would be that if you plan on trying to go the OIC route (by the way these things are not impossible to get but I would not stake everything on them settling, in fact you have a better chance of settling if you own nothing) you may be creating a situation where the IRS feels you do have the means to pay since they look at your recent income/expenses as well as projected earnings.

Honestly you may also want to consult with a tax attorney who deals with IRS deliquency along with a CPA before buying a house with your inlaws cosigning since the lien attaches to any real property and could very well impact their credit.

Shay

[sunnylady303]

Thanks, purplegirl, that's really helpful to know. I'm glad to hear some people get by without a lien. It gives me hope. Shayinme, I have a question. I'm not trying to be difficult but why would I do better without owning property? If they look at income and expenses than my expenses are going to be higher with a house payment. Isn't that going to help them be more apt to decide on a settlement since so much of my income is spoken for? I'm just trying to understand and you've been so helpful so far.
And having a house makes me feel more secure before all this crap starts.
The other thing is that I really feel like you are right about a tax attorney but I don't have money for one really or any clue how to find one. I asked our CPA about it but he said, "why would you need one?" So I thought maybe I was making too big a deal out of stuff. Do you (or anyone) have suggestions about how to go about that?
We had another huge talk with my in-laws tonight about all this and they are so not concerned. I've told them everything I know but they keep insisting that if we work with the IRS they won't put a lien on anything, IF they do it won't really effect their credit because it's so good, and they already are cosigners on our car so "in-for-a-penny-in-for-a-pound." I just don't want them to get hurt. But they keep brushing that off. Maybe they know more than me. But listening to you ladies who have been through it, it doesn't sound that way.

[cristeen]

The reason owning can make things worse is that now you own something of value that they can attach to. They can't really attach to a vehicle or your clothing, but real property is attachable. When you own property you open yourself up to them deciding that they'd be better off with putting a lien on you. That way they are guaranteed to get their money, eventually (when you sell the house).

As for the attorney... if you can't afford an attorney, maybe look for an Enrolled Agent. That is a (usually accountant) person who is trained and authorized to interface with the IRS on the behalf of someone else. An EA should know a bit more about what's going on than your CPA seems to.

HTH

[shayinme]

Originally Posted by cristeen

The reason owning can make things worse is that now you own something of value that they can attach to. They can't really attach to a vehicle or your clothing, but real property is attachable. When you own property you open yourself up to them deciding that they'd be better off with putting a lien on you. That way they are guaranteed to get their money, eventually (when you sell the house).

As for the attorney... if you can't afford an attorney, maybe look for an Enrolled Agent. That is a (usually accountant) person who is trained and authorized to interface with the IRS on the behalf of someone else. An EA should know a bit more about what's going on than your CPA seems to.

HTH

This is excellent advice, frankly the last thing you want right now is to own anything.. if you own nothing and say you make an offer of 8K or whatever, actually owning nothing puts you in a better position to negotiate. Like Cristeen said liens attach to real property and while a lien will be listed on your credit report, if you have nothing they can't take anything. A house though is an asset and buying one right at the beginning of trying to settle with them is not a good move IMO.

Cristeen is right that if you can not afford an attorney than you need to speak with an enrolled agent, because for the amount you owe your CPA seems extremely clueless. As far as the inlaws, again liens attach to real property so in essense if they co-sign and own part of your house it will impact their credit. That is why people are cautioned against co-signing because basically when you co-sign if the person gets into trouble the co-signer is on the hook.

To find an enrolled agent or tax attorney, use the yellow pages, most folks who deal specifically with IRS issues generally mention it in their ads. Or try the state bar association and ask for referrals.

Shay

[purplegirl]

I think I should add that I was very lucky that I did not end up with a lien on my home. I just happened to get an IRS rep who was somewhat compassionate to my case and tears. I would have hired a tax attorney had it not worked out that way. It is a difficult system to work through but honestly, I've found them "friendlier" over the years. However, they want their money and will pull out all stops to get it.

[SleeplessMommy]

I really hope this works out for you!

I think you should ask the in-laws to buy the property you want as an investment and rent it to you for a few years. This will be lower risk for them than co-signing, and will prevent the property from getting a tax lien. Also, you can use your down payment money to help pay off the IRS. In a few years, when the IRS is happy, you buy the house with your improved credit.

You should ask your CPA about how your (future) salary can be structured to minimize taxes. Our former minister had her salary package modified so a substantial part of it was for "housing allowance". I think they paid mortgage and all utilities with that and it reduced their tax burden. Ask the expert!

best wishes.

[shayinme]

Originally Posted by SleeplessMommy

I think you should ask the in-laws to buy the property you want as an investment and rent it to you for a few years. This will be lower risk for them than co-signing, and will prevent the property from getting a tax lien. Also, you can use your down payment money to help pay off the IRS. In a few years, when the IRS is happy, you buy the house with your improved credit.

I was actually going to suggest this as well especially since they are willing to co-sign. Its definitely less risk to them and would put you in a better position as far as dealing with the IRS.

Shay

[sunnylady303]

Now that's an interesting idea. I am planning to try and at least talk to a CPA with special knowledge about all this. But that would be less risk to them. I don't know that they understand how much risk they would be taking on. And I really want to have this house before all this IRS stuff hits - for better or worse it will make me feel more secure to be where we are going to stay while we're doing all of it. Well, I will talk to the in-laws and to a tax expert. You all have been an unbelievable amount of help. I have hope that this will get resolved eventually.

[sunnylady303]

Oh and how hard would it be for them to sell it to us when things get better? All we would need would be financing, right? It's not more complicated or anything, is it?